Insurance is intended to give you peace of mind. But when the tables turn and your insurance provider becomes the source of your distress, do you have a right to file a lawsuit?
When you file an insurance claim, the law states that your insurance provider owes you a duty to act in good faith. This means that the insurance company must not, in any way, attempt to escape its obligation to pay you or look into a claim, as these actions constitute bad faith.
Delving Deeper Into Insurance Bad Faith
Bad faith claims and corresponding lawsuits may stem from any or a number of actions or inactions made by the insurance company.
An insurance company’s applicable duties vary depending on whether the claim is considered “first party” or “third party.” A common example of a first-party claim is when an insurer writes insurance on a property that later on incurs damage. In such case, the company is required to look into the damage, determine whether the policy covers the damage, and pay the appropriate value for the damaged property.
In first-party contexts, bad faith happens when the carrier refuses to acknowledge the claim or has improperly investigated and valuated the damaged property. In rarer cases, bad faith can arise in personal insurance policies or life or health insurance.
In third-party contexts or with liability insurance, specifically, the carrier has two distinct duties. One, the insurance provider must defend a claim even when most of the lawsuit is not covered by the policy. The default rule is that the carrier must cover all defense expenses regardless of the actual coverage limit.
Two, the carrier has a duty of indemnification. This refers to the duty to pay a judgment obtained by a plaintiff against the policyholder, up to the coverage limit, given that the judgment is for omission or a covered act.
Dealing with Bad Faith Insurance: When is a Lawsuit Due?
Bad faith covers a broad range of transgressions. Here are some of the most common reasons insurance companies face a lawsuit for bad faith:
- Unwarranted denial of coverage
- Refusal to pay the claim without an investigation
- Failure to conduct a reasonable investigation
- Failure to come to a fair settlement when liability is established
- Offering significantly less money compared to the true value of the claim to settle
- Failure to confirm or deny coverage promptly
- Failure to deny or pay a covered claim promptly
Bad faith litigation may result in an arbitration decision, a settlement with the insurer, or a verdict. Keep in mind that every case is unique. This is why when dealing with bad faith insurance practices, it pays to have the professional assistance of a reputable law firm that understands how insurance negotiations work.
Haffner Law has years of experience in navigating this complex area of the law. Let us help you take the necessary steps to recover the full value of your claim.
Schedule a free, no-obligation evaluation of your case. Call us at 1-844-HAFFNER or 213-514-5681 today.